Turkey hikes main interest rate to 19% to counter inflation and weak lira

Turkey has increased interest rates to help shore up the value of its currency and counter accelerating inflation. (Reuters)
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Updated 18 March 2021

Turkey hikes main interest rate to 19% to counter inflation and weak lira

  • Main rate increased more than expected
  • Move follows climb in inflation to 15.6%

ANKARA: Turkey’s central bank on Thursday sharply hiked its main interest rate to 19 percent to counter rising inflation and the dropping value of the lira.
The bank said it “has decided to implement a front-loaded and strong additional monetary tightening” after seeing the annual inflation rate climb to 15.6 percent last month.
The bank’s main rate was raised by a greater-than-expected 200 basis points.
The lira gained two percent in value against the dollar moments after the decision was announced.
The Turkish lira has clawed back roughly 15 percent of its value against the dollar since President Recept Tayyip Erdogan overhauled his economic team and appointed Naci Agbal as the new central bank governor in November.
But rising crude oil prices have pushed up Turkey’s inflation rate more than expected while growing yields on US Treasuries have forced investors out of riskier emerging markets.
Economists blame Erdogan’s unorthodox belief that high interest rates cause inflation — instead of slowing it down — for many of Turkey’s current economic problems.
But Agbal appears to have won Erdogan’s blessing to keep the policy rate high for some time to ward off inflation and help the lira recover.
“Governor Abgal is clearly keen to embellish his inflation-fighting credentials and thus was willing to go above and beyond what investors had demanded,” Capital Economic analyst Jason Tuvey said in a research note.
Past central bank managers have burned through most of Turkey’s reserves trying to support the currency while rates remained well bellow the rate of inflation.
The central bank said its “tight monetary policy stance will be maintained decisively, taking into account the end-2021 forecast target, for an extended period until strong indicators point to a permanent fall in inflation and price stability.”
Turkey hopes to bring down the annual inflation rate to under 10 percent by the end of next year and to five percent by the time Erdogan is next scheduled to face an election


Saudi Arabia discuss establishing an industrial zone in Oman

Updated 17 sec ago

Saudi Arabia discuss establishing an industrial zone in Oman

RIYADH: A Saudi industrial zone may be established in Oman to facilitate the transport of goods between the Saudi and Oman special economic zones, Al Arabiya reported.

An investment delegation from the Sultanate discussed the possibility of establishing the industrial zone during a meeting in Riyadh between the secretary general of the Economic Cities and Special Zones Authority, Nabil Khojah, and the undersecretary of the Oman Ministry of Trade, Industry and Investment Promotion Asilah Al-Samsamiyah.

The project aims to facilitate the exchange of experiences in the field of development and supervision in the special economic zones.

In 2018, Oman’s government signed an agreement to obtain financing worth 81 million Omani riyals ($210 million) from Saudi Arabia for one of its major industrial projects.

Dubai plastic waste-to-clothes startup looks to KSA

Updated 24 June 2021

Dubai plastic waste-to-clothes startup looks to KSA

  • The company converts plastic bottles — collected from schools, events and businesses across the city — into clothes
  • The UAE produces at least 10 million recyclable bottles per day

ABU DHABI: A Dubai company that makes clothing from plastic water bottles plans to expand in Saudi Arabia and Egypt after the pandemic forced a complete rethink of its business model.

DGrade was established by Kris Barber in 2010 to address the vast amount of plastic water bottles being produced in the UAE.

The company converts plastic bottles — collected from schools, events and businesses across the city — into clothes.

But when the pandemic closed schools across the country, DGrade was forced to rethink how it operates. It also provided the impetus for the company to consider moving into new regional markets.

The clothes-making process begins by putting the plastic through hot and cold washing until it turns into flakes.

“Once we have the flakes, they’re then put through an extrusion process and turned into a fiber,” Emma Barber, managing director of DGrade, told Arab News. Its plant takes about 150,000 bottles per hour and 75 million bottles per month, she added.

Before the pandemic, the team used to collect plastics from schools and events around Dubai, Barber said. But with the closure of schools and a ban on events, DGrade was faced with a potential halt in its raw material.

Despite the closures, it still managed to collect 1 million bottles in the 2019-2020 school year.

“A lot of children have been collecting plastics at home, bringing them to schools and dropping them off,” Barber said.

“We’re planning to expand in Saudi Arabia because of the huge population and also the amount of plastic.”

She said Egypt is also attractive because of its huge population, plastic waste issues and an already well-established textiles sector.

DGrade also plans to import plastic from Gulf countries. It is coordinating with companies in Saudi Arabia, Kuwait and Qatar to bail plastic and bring it to the UAE, Barber added.

On financial support from the banks, she said: “We’ve been looking for some working capital in terms of bridging loans. It has been difficult because the banks are unable to give you that kind of money due to local legislation and restrictions.”

But she said DGrade will soon announce a second round of investment with a large European company that plans to take an equity share.

“Without the investment that we managed to obtain, it would’ve been almost impossible to fund what we’ve done so far on our own,” Barber added.

To expand the business further, she said it coordinated with some companies to place outdoor bins at private events, which are chargeable at 100 UAE dirhams ($27.23) per month, in order to collect as many bottles as possible.

“We’re talking to ministries, waste management companies and private sector organizations to see if we can place larger cages into residential and community areas so people can place plastic at their convenience,” she added.

Like many companies large and small, DGrade was forced to slash costs during the pandemic. It moved to a smaller office, reduced staff wages and made half of their team redundant, Barber said.

The UAE produces at least 10 million recyclable bottles per day and the output is 18 million kg per year of recycled flake, she added.

Multiple companies have switched back to bottled water and away from dispensers in order to keep their staff safe, she said.

DGrade targets uniform or work-wear companies across all sectors. It has developed 200 types of fabric, all from recycled polyester.

“The traditional fashion industry is highly polluting and damaging to the environment,” said Barber. “Traditional fabrics, such as cotton, are highly water- and land-intensive. They also use pesticides and fertilizers.”

Every year, 100 billion garments are produced worldwide and 92 million tons become waste, according to a 2021 BBC Earth report.

DGrade’s aim is not to promote the use of plastic, but to ensure that when it is used it is being responsibly managed and recycled, Barber said.

“In 99 percent of cases, recyclable plastic is the greenest packaging option available. It’s far better for the environment to use plastic than glass, aluminum or paper,” she added.

DGrade’s process of converting plastic to clothes produces 55 percent fewer carbon emissions, and uses 20 percent less water (which it recycles and reuses) and 50 percent less energy, she said.

Qatar wealth fund says no investment in cryptocurrencies until they mature

Updated 24 June 2021

Qatar wealth fund says no investment in cryptocurrencies until they mature

  • Crypto currencies are currently too volatile, QIA CEO says
  • QIA seeks to boost investment in Asia and US

DOHA: Qatar’s wealth fund avoids investing in cryptocurrencies due to their extreme volatility, Bloomberg reported.

Cryptocurrencies “need a bit of maturity before we make our view about investing in that space,” QIA CEO Mansoor Bin Ebrahim Al-Mahmoud said at the Qatar Economic Forum.

Instead of crypto assets, the QIA will focus on continuing to boost investments in Asia and the US as it looks to balance out a concentration of European assets in its portfolio, Al-Mahmoud said.

The fund is also going to be investing more into warehouses in response to the impact of the coronavirus pandemic on retail and office real estate, he said.

Qatar Investment Authority (QIA) is one of the world’s largest sovereign wealth funds with assets estimated at over $360 billion, according to Global SWF.

Bitcoin has lost more than 50 percent from its mid-April high of almost $65,000. The coin started 2021 trading around $29,000 following a fourfold increase in 2020. It bounced back on Wednesday after earlier whipsawing investors with a dip below the $30,000 level.

This year the fund will also look to formalize the process of factoring in environment, sustainability and governance (ESG) considerations into its investment criteria, the Al-Mahmoud said.

“We have been investing in ESG initiatives and projects for quite some time, and this year it will be institutionalized,” he said. “We will embed ESG into our investment process,” he said.

IMF approves one year $5.2bn stand-by arrangement for Egypt

Updated 24 June 2021

IMF approves one year $5.2bn stand-by arrangement for Egypt

  • IMF authorizes Egypt to withdraw $1.7bn after reform program review

RIYADH: The International Monetary Fund (IMF) approved a 12-month stand-by arrangement for Egypt, with access equivalent to 3.76 billion Special Drawing Rights (SDR) equivalent to about $5.2 billion.

After a strong track record of successfully completing a home-grown economic reform program supported by the IMF’s Extended Fund Facility in 2016-2019, Egypt was one of the fastest growing emerging markets prior to the COVID-19 outbreak, the IMF said in a statement on Wednesday.

The new arrangement aims to help Egypt cope with challenges posed by the COVID-19 pandemic by providing IMF resources to meet Egypt’s balance of payments needs and to finance the budget deficit. It will be allowed to withdraw $1.7bn after its reform program has been reviewed.

“Over the past few years, Egypt saw strong growth, falling unemployment, moderate inflation, buildup of strong reserve buffers, and significant reduction in public debt,” said Deputy Managing Director and Acting Chair Antoinette Sayeh.

Sayeh emphasized Egypt’s commitment to broaden and deepen structural reforms, and refocus to address the economic health crisis during the pandemic.

Egyptian president approves July pension and wage increases

Updated 24 June 2021

Egyptian president approves July pension and wage increases

  • Pensions to be raised 13 percent at cost of 31 billion Egyptian pounds
  • Minimum wage to rise from 2,400 Egyptian pounds from 2,000

RIYADH: Egypt’s official gazette published President Abdel Fattah El-Sisi’s decision to increase pensions as of the beginning of July, Al Arabiya reported.

Pensions will be raised 13 percent at a cost of 31 billion Egyptian pounds ($1.9 billion) and minimum monthly wages will be increased from 2,000 Egyptian pounds to 2,400 Egyptian pounds at a cost of 37 billion Egyptian pounds.

This decision will complete the total of the pension, subsidies and increases to minimum wages, local papers reported.

Egyptians’ salaries have jumped more than 240 times in about 41 years, according to data compiled by Al Arabiya.

Egypt’s budget, to be implemented in early July, also includes two bonuses at a cost of about 7.5 billion Egyptian pounds, and an increase in stimulus at a total cost of about 17 billion Egyptian pounds.